Really good links - Sovereign default - Brad DeLong and Larry Summers - No Trade Theorem - Austrian zero bound - Billion prices - Interest elasticity

Simon Johnson and Peter Boone - Sovereign default - "The Germans should recall the last episode of widespread sovereign default – Latin America in the 1970’s. That experience showed that countries default when the costs are lower than the benefits. Recent German statements have pushed key European countries decisively closer to that point. <..>
        Bond-market participants naturally turn now to calculating “recovery values” – what creditors will get if countries default today. For example, Greece’s debt stock, including required bridge financing under the IMF program, should peak at around 150% of GNP in 2014; much of this debt is external. If a country can support debt totaling 80% of GNP (a rough but reasonable rule of thumb), then we need approximately 50% “haircuts” on this existing and forthcoming debt (reducing it to 75% of its nominal value).
        However, of this 150% of GNP, at least half is or will be official in some form. If it is fully protected, as seems likely (the IMF always gets paid in full), then the haircut on private debt rises to an eye-popping 90%. And this leaves out government spending that may be needed for further recapitalization of Greek banks."

Robert Waldman - Brad DeLong and Larry Summers - "You [DeLong] thought the problem was George Bush not Joe Cassano. You thought the fundamental problem with the US economy was the huge federal budget deficit. You thought the crisis would come when the People's Bank of China got tired of throwing good money after bad and let the dollar collapse and US long term interest rates shoot up.
        Why did you think this (aside from evidence and logic) ? Well you are much inclined to think that the Clinton economic team did a very good job. So you are much inclined to think that Bush did a terrible job. Also you can't stand him.
        The idea high deficits cause high real interest rates which are terrible for growth is very dear to you (not to mention overwhelmingly supported by massive evidence).
        I think this is also true of Larry Summers. He put Harvard's money where his mouth was. He bet on high interest rates on US Treasuries. That most definitely was not because he thought that Greenspan could control everything. That was because he was sure that Bush would cause a catastrophe not just by neglecting dangerous Wall Street developments but by undoing the great work of Clinton, Bentson, Rubin and Summers."

Alex Tabarrok - No Trade Theorem

Tweet of the day - Garrett Jones - "In Austrian term-structure-of-capital theory, the zero nominal bound would seem particularly perilous."

James Hamilton - Billion prices project

Jeremy Grantham - Interest elasticity of consumption - "And let me point out that the Fed's actions are taking money away from retirees.
        They're the guys, and near retirees, who want to part their money on something safe as they near retirement. And they're offered minus after-inflation adjustment. There's no return at all. And where does that money go? It goes to relate the banks so that they're well capitalized again. Even though they were the people who exacerbated our problems.
        And, hopefully, the redeeming feature in that infamous trade is that your corporations go out there, borrow money, build factories, hire people, which they're not doing because consumption is weak and because they were also terrified by the crunch. I— I think, therefore, under these conditions, low rates is actually hurting the economy. It's taking more money away from people who would have spent it —retirees — than are being spent by passing it on to financial enterprises and being distributed as bonuses to people who are rich and, therefore, save more."